Loss of key executives and failure to attract qualified management could limit our growth and
negatively impact our operations.
Successfully implementing our strategies will depend, in part, on our management team. The loss
of members of our management team could have an adverse effect on our business. Our exploration
success and the success of other activities integral to our operations will depend, in part, on our ability
to attract and retain experienced engineers, geoscientists and other professionals. Competition for
experienced professionals is extremely intense. If we cannot attract or retain experienced technical
personnel, our ability to compete could be harmed. We do not have key man insurance.
We are subject to certain regulations, some of which require permits and other approvals.
These regulations could increase our costs and may terminate, delay or suspend our
operations.
Our business is subject to federal, state and local laws and regulations as interpreted by
governmental agencies and other bodies, including those in California, vested with broad authority
relating to the exploration for, and the development, production and transportation of, oil and gas, as
well as environmental and safety matters. Certain of these regulations require permits for the drilling
and operation of wells. The permits required for various aspects of our operations are subject to
enforcement for noncompliance as well as revocation, modification and renewal by issuing authorities.
Existing laws and regulations, or their interpretations, could be changed, and any changes could
increase costs of compliance and costs of operating drilling equipment or significantly limit drilling
activity.
Under certain circumstances, the BOEM/BSEE may require that our operations on federal leases
be suspended or terminated. These circumstances include our failure to pay royalties or our failure to
comply with safety and environmental regulations. The requirements imposed by these laws and
regulations are frequently changed and subject to new interpretations.
In addition, our real estate entitlement efforts are subject to regulatory approvals. Some of these
regulatory approvals are discretionary by nature. The entitlement approval process is often a lengthy
and complex procedure requiring, among other things, the submission of development plans and
reports and presentations at public hearings. Because of the provisional nature of these procedures
and the concerns of various environmental and public interest groups, our ability to entitle and realize
future income from our surface properties could be delayed, prevented or made more expensive.
Regulations related to global warming and climate change could have an adverse effect on our
operations and the demand for oil and natural gas.
Recent scientific studies have suggested that emissions of certain gases, commonly referred to as
“greenhouse gases,” may be contributing to the warming of the Earth’s atmosphere. Methane, a
primary component of natural gas, and carbon dioxide, a byproduct of the burning of refined oil
products and natural gas, are examples of greenhouse gases. From time to time the U.S. Congress
has considered climate-related legislation to reduce emissions of greenhouse gases. In addition, many
states have developed measures to regulate emissions of greenhouse gases, primarily through the
planned development of greenhouse gas emissions inventories and/or regional greenhouse gas cap
and trade programs. In California, for example Assembly Bill 32 requires the CARB to establish and
adopt regulations by 2012 that will achieve an overall reduction in greenhouse gas emissions from all
sources in California of 25% by 2020. In October 2011, the CARB adopted the final cap and trade
regulation, including a delay in the start of the cap and trade rule’s compliance obligations until 2013.
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